Investing in Global Trackers and other similar investments

GeoffTF

I have already given some guesstimates, I wrote:

The Vanguard economists' estimates are of interest here.

"In sterling terms, we think UK shares over the next ten years are likely to return between 4.6% and 6.6% on an annualised basis. For unhedged, non-UK shares the projected range is between 2.8% and 4.8%."

"We see UK bonds offering returns of between 0.8% and 1.8% on average over the next ten years, while international (non-UK) bonds will offer returns of between 0.7% and 1.7%, which is slightly up on our expectations from last year."

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/misstep-by-policymakers-key-risk-to-markets-2022

Lets say 3.8% for equities and 1.2% for bonds. 50 : 50 would give a return of about 2.5%. With the IFA costs that OP has been quoted, that would be less than 1%. He would be better of in a savings account. SustainableLife would probably return a little below inflation. In reality, nobody knows the future. The actual returns could be much more, or much less. Nonetheless, with the economic outlook, and the high prices of both equities and bonds, the next ten years does not look rosy.

IFA route: 2.5% - 1.7% = 0.8%

VG SustainableLife: 2.5% - 0.2% costs = 2.3%

50 : 50 VG ETF and Savings accounts @ 2%: (3.8% + 2%) / 2 = 2.9% - 0.2% costs = 2.7%

All just guesstimates, but it should give you some idea of the relative returns, which is all that is possible here. I have not allowed for taxes. The Vanguard numbers are only ball court at the very best, so it is not worth trying to give accurate numbers. SustainableLife has a chance of beating inflation. The savings account option has a better chance, but involves more work from you. The more work you put in, the better the return you are likely to get. Nonetheless, you might conclude that it is not worth the risk, and go with savings accounts, or a smaller proportion of equities.

DoneWorking

GeoffTF said:

I have already given some guesstimates, I wrote:

The Vanguard economists' estimates are of interest here.

"In sterling terms, we think UK shares over the next ten years are likely to return between 4.6% and 6.6% on an annualised basis. For unhedged, non-UK shares the projected range is between 2.8% and 4.8%."

"We see UK bonds offering returns of between 0.8% and 1.8% on average over the next ten years, while international (non-UK) bonds will offer returns of between 0.7% and 1.7%, which is slightly up on our expectations from last year."

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/misstep-by-policymakers-key-risk-to-markets-2022

Lets say 3.8% for equities and 1.2% for bonds. 50 : 50 would give a return of about 2.5%. With the IFA costs that OP has been quoted, that would be less than 1%. He would be better of in a savings account. SustainableLife would probably return a little below inflation. In reality, nobody knows the future. The actual returns could be much more, or much less. Nonetheless, with the economic outlook, and the high prices of both equities and bonds, the next ten years does not look rosy.

IFA route: 2.5% - 1.7% = 0.8%

VG SustainableLife: 2.5% - 0.2% costs = 2.3%

50 : 50 VG ETF and Savings accounts @ 2%: (3.8% + 2%) / 2 = 2.9% - 0.2% costs = 2.7%

All just guesstimates, but it should give you some idea of the relative returns, which is all that is possible here. I have not allowed for taxes. The Vanguard numbers are only ball court at the very best, so it is not worth trying to give accurate numbers. SustainableLife has a chance of beating inflation. The savings account option has a better chance, but involves more work from you. The more work you put in, the better the return you are likely to get. Nonetheless, you might conclude that it is not worth the risk, and go with savings accounts, or a smaller proportion of equities.

Thanks Geoff

I couldn't ask for more

Very helpful 

DoneWorking

GeoffTF said:

I have already given some guesstimates, I wrote:

The Vanguard economists' estimates are of interest here.

"In sterling terms, we think UK shares over the next ten years are likely to return between 4.6% and 6.6% on an annualised basis. For unhedged, non-UK shares the projected range is between 2.8% and 4.8%."

"We see UK bonds offering returns of between 0.8% and 1.8% on average over the next ten years, while international (non-UK) bonds will offer returns of between 0.7% and 1.7%, which is slightly up on our expectations from last year."

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/misstep-by-policymakers-key-risk-to-markets-2022

Lets say 3.8% for equities and 1.2% for bonds. 50 : 50 would give a return of about 2.5%. With the IFA costs that OP has been quoted, that would be less than 1%. He would be better of in a savings account. SustainableLife would probably return a little below inflation. In reality, nobody knows the future. The actual returns could be much more, or much less. Nonetheless, with the economic outlook, and the high prices of both equities and bonds, the next ten years does not look rosy.

IFA route: 2.5% - 1.7% = 0.8%

VG SustainableLife: 2.5% - 0.2% costs = 2.3%

50 : 50 VG ETF and Savings accounts @ 2%: (3.8% + 2%) / 2 = 2.9% - 0.2% costs = 2.7%

All just guesstimates, but it should give you some idea of the relative returns, which is all that is possible here. I have not allowed for taxes. The Vanguard numbers are only ball court at the very best, so it is not worth trying to give accurate numbers. SustainableLife has a chance of beating inflation. The savings account option has a better chance, but involves more work from you. The more work you put in, the better the return you are likely to get. Nonetheless, you might conclude that it is not worth the risk, and go with savings accounts, or a smaller proportion of equities.

Having thought about these figures and accepting that they are only 'guesstimates' I am seriously wondering wether it is worth the risk to go down the investment route for such a low additional return above simple savings accounts

Savings Rates are on the move upwards and better rates may appear soon

I could delay any decision on investments for one year and spend this time getting more knowledge of the various options

I could of course open an ISA using one of the VG Options you suggested as a small investment gesture

I am aware that this means my cash will be affected by inflation 

Regarding this is there anywhere I can get more info on this affect

I am not a big spender so I'm wondering if it will affect me as much as someone who spends a lot of money on items which have increased drastically in price

As another alternative I'm wondering wether I should use some of the cash to buy a small flat in a retirement block and rent it out 

Though I'm sure this also comes with hidden risks

GeoffTF

Since Vanguard published their analysis, interest rates have risen, as have future expectation of future interest rates. Bonds and savings accounts have become more attractive as a result. Normally, equities would have fallen too. That has not happened this time, but that just adds to the risk if you are buying now. Nonetheless, the equity markets are capable of being over-priced for a very long time. Here is Vanguard's full analysis (dated December 2021):

https://www.vanguard.co.uk/content/dam/intl/europe/documents/en/gbp-vanguard-economic-and-market-outlook-2022.pdf

DoneWorking

GeoffTF said:

Since Vanguard published their analysis, interest rates have risen, as have future expectation of future interest rates. Bonds and savings accounts have become more attractive as a result. Normally, equities would have fallen too. That has not happened this time, but that just adds to the risk if you are buying now. Nonetheless, the equity markets are capable of being over-priced for a very long time. Here is Vanguard's full analysis (dated December 2021):

https://www.vanguard.co.uk/content/dam/intl/europe/documents/en/gbp-vanguard-economic-and-market-outlook-2022.pdf

Thanks Geoff

eskbanker

Maybe worth taking Vanguard's analysis with a pinch of salt - if you search back through all their previous years' forecasts, they're not especially accurate, although not necessarily any more or less credible than everyone else's.  Isn't there some old saying along the lines of if you want ten different opinions about future directions, ask five economists?

older_and_no_wiser

I rebalanced my workplace and personal SIPPs a year ago. This was the first time I took any interest in investing and didn't really understand it all at all. I went through a learning period of this forum, YouTube channels, podcasts and (recommended) investing books. I learnt so much but also had so much choice.

Looking back, I probably overcomplicated things with too many funds. However, it's interesting to see how they all performed over the last year.

I have around 5 years till retirement with a really good size pot (could probably retire now). I will continue to invest in retirement, so I'm taking a long term approach.

The main core of the pot is the in the following funds:

HSBC Global Dynamic

Blackrock MyMap 6
Fidelity World index P

Yes I know, lots of duplication!

Then I have some satellite funds in managed funds covering emerging markets, UK small and micro caps, global small caps, China, Japan and Capital Gearing Trust. These are around 25% of my pot in total.

The best performing are the HSBC and Fidelity World P. If I were to start again, I may put the whole lot into the HSBC Global fund as it is a well diversified multi asset fund which covers all the bases and has performed well throughout.

It's been a fun ride and I'm up in total. I'm (sort of) enjoying monitoring how they all perform and will rebalance accordingly when it's the right time.

coyrls

I don't understand the use of the word "rebalance" when there is no defined allocation to rebalance to.

older_and_no_wiser

coyrls said:

I don't understand the use of the word "rebalance" when there is no defined allocation to rebalance to.

True. That should be 'reallocate'.

DoneWorking

Updated Projections based on latest research

Option 1
DIY Savings Options

Return approx 2%
No Volatility

Capital Erosion

Option 2
DIY Savings / Vanguard or Similar
Return Approx 3% +
(No recent figures for VG ESG Performance)
Volatility

Capital Erosion

 Option 3
IFA Option

1% Upfront for Report

1.2% pa ongoing cost

Overall Return 5.2%
Return After Costs 4%
50/50 Cash and ESG Funds
Volatility

Capital Erosion

Pluses

Investments are managed and updated by IFA

Annual transfer from GIA to ISA

Regular Review

I now need to decide on which option

 
Option 1
Simple

But definite capital Erosion

Option 2
Probably better than 1
But not without risk 
Need for rapid acquisition of knowledge
 
Option 3
Not without risk

But long term could give best outcome

I'd appreciate any comments to help me decide

Thanks for all comments to date